Journal of Business Management - Ba

[Pages:148]ISSN 1691-5348

Journal of Business Management

Issue No.10

2015

Journal of Business Management No.10 ISSN 1691-5348

THE EDITORIAL BOARD

Dr. K.Balaton, Corvinus University of Budapest, Hungary Dr. D.Kamerade- Hanta, University of Birmingham, United Kingdom Dr. O.Gjolberg, University of Life Sciences, Norway Dr. J.Hassid, University of Piraeus, Greece Dr. V.Kozlinskis, Head of the Editorial Board, Riga International School of Economics and Business Administration, Latvia Dr. V.Kundrotas, Adizes Graduate School, USA Dr. T.Mets, University of Tartu, Estonia Dr. D.Pavelkova, Tomas Bata University in Zlin, Czech Republic Dr A.Sauka, Stockholm School of Economics in Riga, Latvia Dr. I.Sennikova, Riga International School of Economics and Business Administration, Latvia Dr. I.Strelets, Moscow State Institute of International Relations, Russia Dr. T.Volkova, BA School of Business and Finance, Latvia Dr. B.Butler, Curtin University, Australia

FOREWORD Management has relatively recently evolved into a legitimate field of research by separating from economics. This gradual separation, or specialisation, implies both positive and negative consequences. The weakening of the crucial linkage between economics and management is one of the evident consequences. The Journal of Business Management No.10 comprises some scientific papers that present studies situated on the border between Economics and Management. All the papers were double blind peer reviewed. Following the necessary corrections and additions resulting from the review process the 12 accepted papers were included into the issue.

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Journal of Business Management No.10 ISSN 1691-5348

TABLE OF CONTENTS

Butler, B., Surace, K. CALL FOR ORGANISATIONAL AGILITY IN THE EMERGENT

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SECTOR OF THE SERVICE INDUSTRY

Muradli, R., Volkova, T. STRATEGIC INNOVATION APPLICATION IN CREATIVE

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INDUSTRIES IN LATVIA

Pavlovska, O., Kuzmina-Merlino, I. FUNCTIONS AND FEATURES OF CONTROLLING

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IN MULTINATIONAL CORPORATIONS

Kuznecova, J., Cirule, I. THE AGE OF MARRIAGE MATTERS: SOCIAL

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ENTREPRENEURS' MATURE AGE AND BUSINESS SUSTAINABILITY

Wascinski, T., Wojcik K.A. METHOD FOR MEASURING THE EFFECTS OF FIRMS'

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RESTRUCTURING PROGRAM

Henilane I. REVIEW OF HOUSING MORTGAGE LENDING POLICY PRACTICES IN

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LATVIA

Stukalina Y. MANAGEMENT IN HIGHER EDUCATION: THINKING AND PLANNING

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MORE STRATEGICALLY

Brence, I., Dubickis, M. STUDENTS WORKLOAD DURING THEIR STUDY PROCESS:

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EVIDENCE FROM LATVIA

Lapina, G., Sluka, I. PROJECT LAB AS A LEARNING TOOL FOR DEVELOPMENT OF

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PROJECT MANAGEMENT COMPETENCES AT UNIVERSITY

Barbars, A. INTERACTION BETWEEN ORGANIZATIONAL CULTURE AND WORK 106 ENGAGEMENT IN AN IT DEPARTMENT WITHIN FINANCIAL INSTITUTION

Avota, S., McFadzean, E., Peiseniece, L. LINKING PERSONAL AND

124

ORGANISATIONAL VALUES AND BEHAVIOUR TO CORPORATE SUSTAINABILITY: A

CONCEPTUAL MODEL

Aljena, A. WHY CONTEMPORARY FINE ART ARTISTS ARE STARVING IN LATVIA?

139

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Journal of Business Management No.10 ISSN 1691-5348

CALL FOR ORGANISATIONAL AGILITY IN THE EMERGENT SECTOR

OF THE SERVICE INDUSTRY

Bella Butler Senior Lecturer, Curtin University, Australia

e-mail: bella.butler@cbs.curtin.edu.au

Kayla Surace Business Analyst, Metrix Consulting, Australia e-mail: kayla.surace@.au

Abstract Purpose of this conceptual study is developing the theoretical framework for investigating organisational agility in small and medium enterprise in the newly emerging industry. Design of research is based on two distinctive streams in the literature: theoretical conceptualisation of organisational agility and the media and statistical publications on the small bars and restaurants sector of the Western Australian hospitality sector. Findings ? Identified drivers of organisational agility in the emergent sector for firms with limited resources and agility strategies were formulated and justified. Theoretical contribution the concept of organisational agility, previously extensively studied in manufacturing, is interpreted in the context of services and, specifically, in conditions of the newly emergent industry. Managerial implications: the information for managers on agility actions that can be undertaken by small businesses operating at a resource disadvantage compared to their larger counterparts.

Keywords: agility, emergent industry, small businesses, strategy, Western Australia. Classification: exploratory qualitative study.

1. INTRODUCTION

The idea of agile responses to the fast changes in the external environment to neutralise market turbulence is not a new. Since the early 1990s organisational agility was viewed by scholars and practitioners alike as an effective solution which protects businesses in the manufacturing processes from losses and enable their survival in conditions of unpredictable changes in the operational environment (Vasquez-Bustelo, Avella and Fernandez, 2007). In conditions of uncertainty and an increasing pace of change, the ability businesses to survive depends on their agility in responding to the challenges of unpredictable environment. While the importance of agility is commonly recognised (Arteta and Giachetti 2004; Dove 1999; Yusuf, Sarhadi and Gunasekaran, 1999), there are limited studies which interpret agility in context of specific and, in particular, newly emergent industries. Yes, especially in the newly emergent sectors of the industry services, agility is crucial for vulnerable firms to survive in a still evolving market environment (van Oosterhout, Waarts and Hillegersberg, 2006).

The newly emerging businesses are very fragile and represent an interest for managers and scholars alike to identify success strategies in emergent business sectors. According to the Australian Bureau of Statistics, more than 50% of all established businesses fail in the first four years, for example, out of all existing new businesses established in 2007, just 48.6% were in business in July 2011. Despite such dramatic failure rates, growing industries, such as food service sector, part of the hospitality industry, still offer a lot of room for new entrants. Growth rates in the Australian hospitality industry are predicted to continue at 4.3% per annum through to 2017 (DRGL, 2014). One of the fastest growing sector of this industry is the small bar/restaurant sector which is newly emerging in recent years.

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Journal of Business Management No.10 ISSN 1691-5348

Although, the Australian hospitality industry is fast growing, its players face serious challenges attributed to common characteristics of the emerging sectors which include increasingly complex regulatory environment, sophisticated and educated consumers, labour challenges, skills shortages, low market entry barriers, and intense competition (Adelaja, Nayga Jr, Tank and Schilling 1999; Kozac and Rimmington 1998; Olsen and Zhao 2001; Tsai, Pan and Lee 2011; Parsa, Self, Sydnoe-Busso and Yoon 2011). Specifically, the ongoing changes in the regulatory environment represents the most critical challenge for firms operating in the hospitality industry (Tsai, Pan and Lee 2011). Other challenges are caused by shifts in consumer demographics and consecutive behaviour (Adelaja et al., 1999; Ruhanen, Mclennan and Moyle 2012), a lack of financial support and management expertise among current industry players (Ruhanen, Mclennan and Moyle 2012).

The dominant players of this industry are small firms who count 85% of the industry firms, and these small firms are highly dependent on long-term debts to support their investments (Tsai Pan and Lee 2011). The industry challenges influence the way of doing business and, particularly, the expected speed of firms' response to the environmental changes and demand organisational agility. The competitive pressure on firms in the small bar/restaurant sector of the Australian hospitality industry to respond and act in an agile matter motivated our study. The purpose of our study is to generate a theoretical framework for analysing an emergent industry sector with limited resources and capture business strategies of its players. The research questions of our study include the following: how does the new sector of the industry emerge? And how do emergent industry players with limited resources and capabilities implement agility strategies? Our study contributes into the literature on organisational agility by developing a theoretical framework for studying agility in an emergent food services industry. The paper is structured as follows: it begins with the literature review on organisational agility resulting in formulation of research questions; next, the method and context of the study are introduced. The paper is concluded by the discussion of findings and their theoretical and practical implications.

2. ORGANISATIONAL AGILITY AND ITS DRIVERS

Agility was first introduced in manufacturing in relation to the vital changes to operations undertaken by businesses in response to increased volatility and significant changes in the operational environment (Vasquez-Bustelo, Avella and Fernandez, 2007). In the early 1990s, organisational agility was considered as a potential solution for firms operating within turbulent markets (Nagel and Dove, 1991). In that context, an agile organisation was defined as "... a manufacturing system with extraordinary capabilities (internal capabilities: hard and soft technologies, human resources, educational management, information) to meet the rapidly changing needs of the marketplace (speed, flexibility, customers, suppliers, infrastructure, responsiveness). A system that shifts quickly (speed and responsiveness) among product models or between product lines (flexibility), ideally in realtime response to customer demands (customer needs and wants)" (Yusuf, Sarhadi and Gunasekaran, 1999: 36). As the manufacturing firms are traditionally characterised by inflexible and repetitive processes, the changes agility brought to operations are easy to be observed and thus well acknowledged in literature (Joroff, Porter and Feinberg, 2003).

The majority of publications emphasised the importance of organisation agility and offered their own interpretation of the concept. As explained by Yusuf, et. al., (1999: 35) "as a mark of the newness of the concept, every publication attempts to define and explain agility". These authors gave one of the relatively early definitions of organisational agility, specifically, as "the successful exploration of competitive bases (speed, flexibility,

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Journal of Business Management No.10 ISSN 1691-5348

innovation, proactivity, quality and profitability) through the integration of reconfigurable resources and best practices in a knowledge-rich environment to provide customer-driven products and services in a fast changing market environment" (Yusuf et. al., 1999: 37). Many investigations into the diverse aspects of organisational agility followed this paper, coupled by clarifying definitions specific to each aspect of an organisation (Jin-Hai, Anderson and Harrison, 2003; Meade and Rogers, 1997). For example, the agility definition of van Oosterhout, Waarts and Hillegersberg (2006: 134) solely concerns distinguishing agility from flexibility: "business agility is being able to swiftly change businesses and business processes beyond the normal level of flexibility to effectively manage unpredictable external and internal changes." The other definition of agility provides a clarification of context for managing of supply chains and emphasises the importance of costs cutting and timely and proactive response to the customer's requirements Agarwal, Shanker and Tiwari, 2007). Further understanding of agility was given by scholars who compared agility and flexibility and also investigated how agility can be achieved. The later studies stressed the role of cooperation and integration in the implementation process (Kidd, 1994; Vasquez-Bustelo, Avella and Gernandez, 2007). This divergence in focus and purpose of each organisational agility investigation, coupled by distinct definitions adopted in each paper has largely contributed the multidimensional nature of the concept, consequently leading to a lack of consensus and the confusion surrounding agility.

There are a number of the various interpretations of agility. For example, Dove (2001: 5) viewed agility as "derived from both the physical ability to act (response ability) and the intellectual ability to find appropriate things to act on (knowledge management). Agility is expressed as the ability to manage and apply knowledge effectively, so that an organisation has the potential to thrive in a continuously changing and unpredictable business environment." Other scholars alternately proposed that "agility is the ability over time to respond quickly and effectively to rapid change and high uncertainty" (Joroff, Porter and Feinberg, 2003: 293). More recent publications argue that survival in turbulent unpredictable environments makes it mandatory for firms to increase the speed of their response if these firms are determined to survive (Chandler McLeod, 2011).

2.1.

DISTINGUISHING AGILITY FROM FLEXIBILITY AND

ADAPTABILITY

Although flexibility as a business concept was established long before agility, both of them are often used interchangeably in the literature. Both, agility and flexibility are focussed on business survival (Sharifi and Zhang 1999). One of the first definitions of flexibility stresses the ability of firms to respond to changing circumstances (Mandelbaun, 1978) and this ability is also included in most of definitions of agility. However, agility include more aspects than flexibility (Yusuf, Sarhadi and Gunasekaran, 1999). Organisational agility encompasses a wide range of components, rather than attributing agility strategies to flexibility characteristics alone (Baker, 1996; Kidd 1994).

A major divergence between agility and flexibility is observed regarding each concepts focus within the hierarchy of an organisation. Flexibility refers to the top level of an organisation (Baker, 1996), whereas agility emphasises integrative efforts at all levels within an organisation. Indeed, agility goes beyond the ability of flexibility alone to additionally encompass proactive behaviours and a focus on every level within an organisational hierarchy (Huang and Nof 1999; Sharifi and Zhang 1999). Moreover, flexibility is a vital component to the success of an agility strategy, yet is only a single component of the strategy, not its entirety.

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Journal of Business Management No.10 ISSN 1691-5348

Flexibility is used to address responses and the consequent organisational changes that may be largely predetermined by an organisation (Van Oosterhout, Waarts and Hillegersberg, 2006). Further, flexibility refers to the changes in an organisations environment where there is ample available information regarding inputs and outcomes (Van Oosterhout, Waarts and Hillegersberg 2006). However, when changes are unpredictable, flexibility is not enough and agility is required. In this conceptualisation, flexibility is viewed as a single element of agility strategy.

Adaptability is defined as an "inherent ability to adjust or modify" (Katayama and Bennett, 1999). Adaptability is further distinguished from flexibility by Van Oosterhout, Warts and Hillegersberg (2006: 132) who view adaptability as an ability "to swiftly change businesses and business processes beyond the normal levels of flexibility to effectively manage unpredictable external and internal changes". However, similarly to flexibility, agility only encompasses adaptability as a single component (Yusuf, Sarhadi and Gunasekaran 1999). Each foundational concept, namely, flexibility and adaptability, should be synthesised into a comprehensive approach to strategy, coined organisational agility.

2.2.

DRIVERS OF ORGANISATIONAL AGILITY

Chance is recognised as the major driver of organisational agility (Sharifi and Zhang, 1999; Zhang and Sharif, 2000; Ganguly, Nilchiani and Farr, 2009). Drivers of agility are linked to changes in consumer preferences, emergence of new technology, changes of the business systems of firms, market changes and shifts in social environments (Sharifi and Zhang, 1999; Yusuf, Sarhadi and Gunasekaran, 1999; Oosterhout, Waarts and Hillegersberg, 2006). Although the drivers of agility concern those forces external to an organisation, internal triggers additionally drive the adoption of agility strategies. Internal triggers are thought to be caused by external factors, or those planned internal changes resulting in unexpected consequences (Joroff, Porter and Feinberg 2003; Van Oosterhout, Waarts and Hillegersberg 2006). Table 1 presents the drivers of organisational agility and the required organisational actions required for agility strategies within organisations. Based on the discussion of the drivers of agility, the first research question is formulated: what are the drivers of organisational agility can be identified in the context of an emergent industry?

Table 1 Drivers of Organisational Agility and Organisational Actions

Drivers of Agility

Organisational Actions

Description

Technological shifts New technology developments

Changes in the process (e.g. booking; supply chain management)

Faults are discovered in employees work due to irrelevant technologies or the physical work of the employees

Jobs skills shift Resource limitations

Update the organisational routines and streamline

operations

Continuously learning of employees from the experience resulting in constantly fine-tuning work practices

Emerging consumer markets and changes in consumer preferences

Communication with consumers and knowledge transfer within

an organisation

Opportunity identification and perusal; ongoing learning from consumers, competitors and the market

Growing customer expectations

Efficiency programs and new business systems

New ways of thinking are discovered from an examination of processes when pursuing greater efficiency

Source: Developed by authors based on Joroff, Porter and Feinberg, 2003, and Yusuf, Sarhadi and

Gunasekaran, 1999.

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Journal of Business Management No.10 ISSN 1691-5348

2.3.

RESOURCES AND CAPABILITIES FACILITATING AGILITY

DEVELOPMENT

Organisational agility requires specific capabilities and resources of firms. Agility must be embedded into every component of the business including organisational structure, culture, technology, leadership and management (Chandler McLeod, 2011). The management of an organisation must promote a culture of agility, emphasising its importance to personnel at every level of the organisation (Vazquez-Bustello, Avella and Fernandez, 2007). In fact, organisational structure, information systems, and the mind sets of those within the organisation are all used together to enable organisations to act agile (Ararwal, Shanker and Tiwari, 2007). Communication is considered as the most vital capability in acting agile. Communication enable organisations to integrate personnel at different hierarchical levels, as well as to integrate organisational structure and culture.

Organisational structure has a significant influence on the organisational ability to act agile (Golan 2006). In particular, a compressed ? flat- hierarchical structure allows firms to avoid rigid formal processes that slow the speed of their response to the environmental changes. To ensure agility in the organisation, its employees shall be empowered by decentralised decision making, continuous training and development leading to capacity building with multiple skills and flexibility in accomplishment of tasks (Yusuf, Sarhadi and Gunasekaran, 1999). Investing in employees and instilling them with the capabilities of selfdirected work and discipline also allows organisations to use a simple structure, thus, increasing its ability to act agile. This further emphasises the importance of employees as a resource in achieving agility.

Technology is also recognised as a vital resource of organisational agility, especially in the manufacturing industry (Huang and Nof 1999; Yusuf, Sarhadi and Gunasekaran 1999). Technology can be used for a better interpretation of the market and industry knowledge and its communication through the value chain and responsiveness to customers. Although technology presents as a vital resource and facilitator of organisational agility, it may also act as a hindrance in achieving agility when it stiffs innovation and flexibility (van Oosterhout, Waarts and Hillegersberg 2006). For example, if the used an online booking system does not allow to link the order with the inventory or delivery services, there will be miscommunication in the value chain and, as a consequence, slow response to the customers. Based on the analysis of capabilities and resources of organisational agility, the second research question is formulated: what are the resources and capabilities that enable organisations to act agile in the context of an emergent industry?

3. THE METHOD AND CONTEXT OF THE STUDY

The qualitative study based on multiple case studies (Eisenhardt, 1989; Hesse-Biber and Leavy, 2011; Yin, 2009) was chosen as the method of this study. The chosen research strategy allowed considering agility, a phenomenon under investigation, in the chosen context. Case studies are deemed appropriate not only when the phenomenon under investigation is relatively new, but also when existing literature surrounding such a phenomenon is conflicting (Bailey, 1994; Eisenhardt, 1989). According to Yin (2009), utilising a case study strategy is the good choice of method in the newly emergent sector of the hospitality industry due to the following reasons: 1) research focus is on contemporary events/phenomena, 2) research questions under investigation are of a how/why nature (how are firms displaying agility in this market/context), and 3) researchers have no control over the events related to the phenomenon. Satisfaction of these requirements cements the validity

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